Wild Oil Markets Leave Shanghai a Little Dizzy
Turmoil in U.S. trading ought to be an opportunity for China’s would-be benchmark. There’s not much sign it’s gaining traction.
China doesn’t have anywhere to put the oil either.
Photographer: STR/AFP/Getty Images
A pandemic, a supply glut and plunging U.S. crude futures: With the world upended, there’s never been a better time to challenge established oil benchmarks. So shouldn’t China’s two-year-old yuan-denominated contract be doing just that?
The upheaval in oil is hard to overstate. Last week’s extreme dive into negative prices, driven by the quirks of physical delivery, dealt a significant blow to the credibility of West Texas Intermediate futures. That contract has long been a benchmark for the U.S. oil industry, albeit a flawed one. Heavy selling from the biggest oil exchange-traded fund exacerbated the slide, which could see a repeat in May, when June futures expire. WTI is trading near a meager $16 a barrel, with Europe’s Brent, a better indicator of seaborne oil demand, at under $23. Both are at a fraction of January levels well above $60.